Gujarat Department Wise Schemes Update 2026

Policy Update
Anushree Khare

Introduction

The developmental history of Gujarat can be traced back to the State’s historical merchant culture. This merchant culture has been shaped by many different historical trading systems throughout India. From ancient time when it was known as “Lothal” which was one of the oldest ports of India, then from medieval time when it was also known as “Cambay” and “Surat”, these cities were centers for trade.

Gujarat has had a long history of entrepreneurship. These entrepreneurs have survived changes in monopolistic control by British colonial power and their successors. A geographical identity frames this historical trade impetus. A 1,600 km long coastline abuts salt flat deserts of Kutch, industrial plains stretch along a central corridor, while undulating highland regions of the east are home to native populations. The historical geographic bridge between global trade networks across the Arabian Sea is now being converted into an industrial and logistical powerhouse.

On Feb. 18, 2026, the State of Gujarat released its Annual Budget Report (State Budget Publication Number 01), detailing a total of ₹4,08,052.87 Crore in funding for FY 2026–27 in the State Legislature. The proposed budget is designed as part of the overall “Viksit Gujarat@2047,” and includes a general fund allocation increase of 10.2 percent over last year’s budget. As such, it represents a significant expansion to public funding with a large revenue surplus of ₹25,586.82 Crore, and significant expansion of capital expenditures to ₹1,57,358.49 Crore to fund new economic growth initiatives through the construction of high speed transportation systems, and mega urban infrastructure, along with programs directed towards building the human capital of citizens.  

This article evaluates all aspects of the various departments within Gujarat’s 2026–2027 budget. It will provide an overview of each department, including their statutorily required functions, primary functional areas, and allocation of funds toward specific programs. In addition, the briefing will examine the relationship between these different functions and how they relate to the social and economic goals that are being pursued through the administration of public policies in Gujarat during FY 2026–27.  

Background and Accounting Structure

The State of Gujarat has a structure based on 108 separate Demands for Grants, divided into twenty-seven secretariat-level departments. Under the Consolidated Fund, two primary types of accounts cover state operations: 

• Revenue Accounts (accounting for day-to-day operating and welfare-related activities) 
• Capital Accounts (funding asset creation, infrastructure investments, and recovery mechanisms). 

Overall, revenue receipts are projected to be ₹2,71,602.41 Crore; primarily from strong SGST collections of ₹80,127.15 Crore and sales tax collections of ₹33,780.00 Crore.

Source: Compiled by author from Annual Financial Statement (Budget) 2026–27, Budget Publication No. 01, Finance Department, Government of Gujarat.

The budgetary framework categorizes schemes across four operational horizons:

 (1) Multi-sectoral composite plans: Large umbrella structures of composite interventions

 (2) Flagship urban and infrastructure funds: High capital projects implemented through Special Purpose Bodies

 (3) Targeted social DBT welfare: Direct Benefit Transfers for Education, Nutrition, and Social Security

 (4) Institutional modernisation: Public Grievances and Administrative Digital Platforms

Functioning and Scheme Performance Mapping

The implementation of State Public Policy is reliant upon statutory major headings which are to be translated from stated policy intention into quantifiable fiscal disbursements. Below is a table showing how Gujarat’s high priority expenditures, new social programs and policy initiatives and legacy social programs are mapped to the Annual Financial Statement for FY 2026-27.

Table 1: Department-Wise Mapping of Flagship Schemes, Statutory Demands, and Budget Allocations (FY 2026–27)

Source: Compiled by author from Annual Financial Statement (Budget) 2026–27, Budget Publication No. 01, Finance Department, Government of Gujarat.

Performance and Budgetary Path of the Fiscal System

In accordance with the requirements of statutory financial discipline, the fiscal results in FY 2026–27 reflect a continued commitment to fiscal discipline. Additionally, there is evidence that productive capital investments have increased while the overall surplus generated by revenue has remained stable.

The state is expected to generate a surplus of ₹25,586.82 Crore (0.77 percent of GSDP) in FY 2026–27 from operationally-generated revenue, which is similar to previous years where all recurrent administrative and welfare expenses were funded using only internally-generated revenue and central assistance. There will be no requirement for revenue borrowings to fund routine government activities since there will be sufficient surpluses to support the growth of the overall capital expenditure plan to ₹1,57,358.49 Crore without exceeding the limits set for debt sustainability.

1. Capital Expenditure – The Key Driver of Public Asset Creation: Capital expenditure, which is the most important factor driving the creation of public assets, has been planned to amount to ₹1,07,159.54 Crore for FY 2026–27, representing a sharp increase of 25.34 percent compared to the revised estimates of FY 2025–26 (₹85,494.69 Crore). At about 3.2 percent of the projected GSDP of ₹33.25 Lakh Crore, the capital expenditure ratio of Gujarat remains higher than that of other states. It may be noted that economic services account for more than 71 percent of the total resources earmarked for creating public assets and are mainly allocated for building high-speed road corridors, irrigation systems, and regional urban development programmes.
2. Revenue Generation Profile: Internal resource mobilisation demonstrates significant strength and indicates substantial self-sustaining ability of the state’s revenue base. As per available information, during FY 2026–27, it is expected that Gujarat would raise approximately 71.4 percent of its total revenue receipts (approximately ₹1,94,050 Crore out of ₹2,71,602.41 Crore) through its own taxes and non-taxes. As such SGST collections are estimated at ₹80,127.15 Crore and Sales Tax/VAT on petroleum products are estimated at ₹33,780.00 Crore, and these two constitute the major sources of state revenue thereby reducing exposure to possible deviations in grant allocations made by the Centre.
3. Committed Expenditures: It is estimated that committed expenditures comprising employee salary costs (₹54,722.00 Crore), pension payments (₹30,403.26 Crore), and interest charges on debt (₹33,018.84 Crore) would consume approximately 43.5 percent of total revenue receipts in FY 2026–27. Although this represents an improvement compared to actual consumption in FY 2024–25 (46.9 percent), committed obligations would still capture substantially over forty-three paise in each rupee raised as revenue. Therefore, to enable continued development spending across various departments’ demand lines, it is essential that ongoing rationalisations in open-ended subsidies provided on electricity consumption are undertaken to free up additional discretionary funding for development purposes.

 Socio-Economic and Fiscal Impact 

1. Tribal and Regional Inclusivity: The allocations made under Demand No. 96 (Tribal Area Sub-Plan) are the largest combined developmental expenditure ever undertaken by the Government of Gujarat, amounting to ₹35,782.04 Crore. This is a historic first that will provide holistic livelihoods, secure drinking water supply systems, roads for transportation, and educational opportunities at the residential level to tribal communities living in eastern regions.
2. Logistics and Urbanisation Momentum: The expenditures earmarked for urban infrastructure (SJMMSVY), which amount to ₹16,224.75 Crore, and road corridors (Head 5054), which amount to ₹13,500.58 Crore, will help create decentralized economies in different parts of the region, improve connectivity with ports, and connect satellite cities.
3. Agrarian Protection and Power Subsidisation: Under the Agriculture Department, an allocation of ₹14,870.17 Crore has been made for compensatory power tariffs (Major Head 2801). Such allocation helps stabilize income levels of farmers and ensure a consistent eight hours of daytime electricity supply to their families through the Kisan Suryodaya network.
4. Targeted Human Capital Investments: A total of ₹42,261.39 Crore has been allocated under Major Head 2202 (General Education); this head has also received additional funds for targeted nutrition programmes (Mukhyamantri Poushtik Alpahar) and STEM incentives (Namo Saraswati). This creates structural retention nets across three tiers of elementary, secondary, and higher education.

Emerging Issues

Increasing Burden on State Spending for Ongoing Obligations: Although the state of Gujarat has a surplus from its operating revenues, the sustained burden of committed obligations (salaries, pension liabilities, and debt interest servicing) is absorbing nearly 43.5% of total revenue receipts. The consistent burden limits the fiscal room that can be used to support new discretionary development spending as well as social sector programs.

Drain on Funds Available for Education and Other Needs through Subsidy Payments to the Electric Utility: For example, power sector tariff subsidies (Major Head 2801) are funded at a rate of ₹14,870.17 Crore annually. These subsidy payments represent an ongoing drain on revenue funds that would be better spent supporting education programs and other types of assets.

Execution and Absorption Constraints: The increasing use of public funds for capital expenditures, such as those associated with  urban development (Major Head 4217) and roads (Major Head 5054), may lead to construction delays and capital carry-overs if municipal corporations and panchayats do not have sufficient technical and project management capacity to manage these projects.

Regional and Intra-State Differences in Access to Basic Infrastructure: Although there are significant increases in the amounts allocated to sub-plans (for example, Vanbandhu Kalyan Yojana-II), differences in access to basic infrastructure in eastern tribal areas versus central industrial corridors demonstrate the need to monitor these disparities in an ongoing fashion.

Way Forward

In order to create a sustainable financial framework for the long term, future policy development should include a systematic method of closing the significant gap between how budget money is allocated in statute and what actually happens on the ground as a result. In order to do so, it will be necessary to link fiscal reform and capital expenditures directly to the structural execution bottlenecks, institutional limitations, and administrative implementation barriers that have been found to exist within major State Government Departments.

1. Strengthening Capacity of Municipal Corporations and Regional Authorities to Absorb Projects: As urban capital outlays grow rapidly under Urban Development (Major Head 4217), there is a need to strengthen the project execution capability of municipalities and regional urban development authorities so that capital does not get carried over.
2. Rationalising Subsidies in the Power Sector: The large expenditure incurred on account of power sector tariff subsidies (Major Head 2801) necessitates accelerated solarisation (PM Surya Ghar and Feeder Solarisation) to shift from recurring fiscal subsidies on tariffs to capital-efficient solar assets.
3. Output-Outcome Monitoring of Mega-Fund Allocations: Due to the emergence of new long-term funding mechanisms like the Viksit Gujarat Fund, it becomes necessary to formulate granular Key Performance Indicators (KPIs) to monitor the productivity of public capital spending, spatial equity, and durability of assets.

References  

Finance Department, Government of Gujarat. (2026). Annual financial statement (budget) of the Government of Gujarat for the year 2026–2027 (Budget Publication No. 01). Government Central Press. https://financedepartment.gujarat.gov.in/

Finance Department, Government of Gujarat. (2026). Demands for grants of the Government of Gujarat for the year 2026–2027 (Demands 01 to 108). Government Photo Litho Press. https://financedepartment.gujarat.gov.in/

Government of Gujarat. (2026). Speech of Shri Kanubhai Desai, Minister of Finance, presenting the budget estimates for the year 2026–2027 to the Gujarat Legislative Assembly. Finance Department, Gandhinagar.

About The Contributor

Anushree Khare is a Research & Editorial Intern at the Impact and Policy Research Institute (IMPRI). She holds a B.A (Hons) degree in Economics with Research. Her academic and professional interests lie in the domains of finance, quantitative research, data-driven policy analysis, and business strategy.

Acknowledgement: The author extends sincere gratitude to the IMPRI team for their guidance and support along with the reviewers  Ms. Sneha Kohli and Ms. Divya Natarajan for their valuable feedback and insights.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organization.

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